PureGym Prices €1.05B, £500M SSNs In Line With Investor Expectations; Paramount Skydance 2L SSNs Slip in Secondary; InPost Prices TLB, SSNs After Documentation Changes

Reporting: Holly Beveridge
Credit Research: Tia Zhang, Rodrigo Amaral

Primary markets in Europe maintained a strong pace of issuance this week, driven by a number of large deals, including Paramount Skydance and InPost. On the loan side, smaller deals also found support, with Terras Group and Sunday Natural, both pricing transactions that launched last week.

The busy week capped a broader rebound in primary activity in September. Issuance in September recovered to approximately €9.7 billion (excluding Paramount) from negligible activity in August, with BB rated credits making up most of the supply, according to Octus analysis. Meanwhile, leveraged loan issuance remained muted, with monthly volumes up only modestly to €4 billion in September from €1.9 billion in August. More detail is available in Octus’ EMEA Leveraged Finance monthly report HERE.

The robust primary activity came despite a more somewhat challenging macro backdrop with inflationary prints making headlines. Eurozone inflation accelerated to 3.8% in September, above the 3.6% forecast and up from 3.2% in August. The higher print pushed rate expectations higher, with markets anticipating further European Central Bank hikes, amid record high prices for diesel. Meanwhile, in the United States traders are broadly anticipating another hike, but are thus far undecided on the timing of when this will be.

PureGym €1.05B, £500M SSNs Due 2032 Price at IPT

U.K.-headquartered fitness club operator PureGym priced its offering of €1.05 billion and £500 million in senior secured notes, or SSNs, due 2032 at 6.5% and 8%, respectively. Final pricing fell in line with initial price talk, as well as investor expectations.

One buy-sider who had at first been skeptical about the deal said that the euro SSN was attractive at IPT of 6.5%, and potentially as tight as 6.25%. A second buy-sider interested in the sterling tranche said it was fairly cheap for the rating at 8%. However, the company’s limited free cash flow made it less attractive, he added.

The first buy-sider liked PureGym’s strong track record of return on capital deployed on new gym locations, as well as growing membership count per gym and revenue per member.

Though acknowledging that David Lloyd was not a perfect comparable, he nevertheless thought that at a more modest price point, PureGym would be better placed to weather an economic downturn as consumers would be less likely to cut their subscriptions.

Several investors expected that PureGym’s sponsor Leonard Green & Partners would look to sell the company, which it has owned the majority of since 2017. But they were divided over whether an initial public offering in the United States made the most sense.

Octus’ analysis is available HERE.

InPost Prices €2B 7Y TLB At E+325 Bps, 99 OID; Upsizes 7Y SSNs to €700M

InPost priced a €2 billion seven-year term loan B at Euribor + 325 bps, tightened from price guidance of between E+325-350 bps and upsized from €1.5 billion. The logistics firm also priced its €700 million SSNs due 2033 at 6%, upsized from €400 million and tightened from IPT of 6-6.25%.

The deal was finalized after InPost removed an unpopular provision from its documentation that would have banned cooperation agreements between lenders, as part of a raft of changes made a day before commitments were due on its seven-year minimum €1.5 billion term loan B, according to a memo of the changes obtained by Octus.

The anti-cooperation provision included in the docs had drawn strong opposition from investors when the deal launched, as they bar holders from voting and punish noteholders who seek to coordinate and form a unified front against creditor activity.

The anti-co-op provision was also included in the bond documentation, marking the first time this had been attempted in European high-yield bonds, according to Octus legal analysts. While this strategy has been attempted for European broadly syndicated loans, all such attempts have previously been rejected by lenders, they added.

Octus’ analysis is available HERE.

Paramount $12.4B 2L SSNs Soften as Much as 5 Points on the Break Amid Weak Global Market

Paramount Skydance’s $12.4 billion-equivalent senior secured second lien notes softened on the break on Oct.1, with longer-dated notes falling as much as five points as market participants pointed to a lack of enthusiasm for the deal amid a global bond selloff that pushed 10-year Treasuries to a 24-year high.

The second lien SSNs launched on Sept. 28 and priced Sept. 30. The deal comprised a five-year euro tranche and five, eight and 10-year dollar tranches. The debt supports a $57 billion-equivalent leveraged buyout financing package to fund its acquisition of Warner Bros. Discovery.

Investors flagged that the bonds had softened on the break, with shorter-dated notes slipping by about two points and the long end of the dollar curve slipping by as much as five points.

Market participants generally pointed to a lack of enthusiasm for the deal, inconsistencies around synergies and disclosures and unfavorable pricing and supply relative to tough macroeconomic conditions this week.

Several buy-siders posited that the bonds could also be trading down in the context of the global interest rates environment, leading to a widening of spreads across the board. Yields on 10-year U.S. Treasuries climbed as much as 4 bps to 5.34% on Oct. 1, the highest level since 2002, before falling back to 5.29% later in the day. The iTraxx Europe Crossover index also widened sharply on Oct. 1 amid a wider global selloff, jumping as much as 8 bps in intraday trading, according to IHS Markit data.

Octus’ analysis is available HERE.

CVC-Backed Sunday Natural Prices €515M TLB; Terras Group Prices €470M TLB

Sunday Natural, the CVC-backed German premium vitamins and supplements brand, priced a €515 million TLB at E+350 bps with OID of 99.75. The seven-year, covenant-lite facility carries a 0% floor and has six months of 101 soft call protection.

Proceeds will refinance existing bank debt and fund an inaugural shareholder distribution. Moody’s and S&P rate the company B2, with a positive outlook and B+.

Also this week, Terras Group, the German critical infrastructure services platform, priced a €470 million TLB at E+375 bps with OID of 99.50. The seven-year facility backs the acquisition of a majority stake in the business by H.I.G. Capital, through borrower Bedrock BidCo GmbH.